FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED FEBRUARY 28, 1998
COMMISSION FILE NUMBER 0-12561
MEDITECH PHARMACEUTICALS, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER
NEVADA 95-3819300
- ------------------------------- -------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
10105 E. Via Linda, # 103-382, Scottsdale, AZ 85258
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)
(602) 614-2874
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(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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 ( AND FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.
YES X NO
----- -----
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASS OF
COMMON STOCK, AS OF THE LAST PRACTICABLE DATE.
119,016,925 SHARES OF $.001 PAR VALUE COMMON STOCK AS OF APRIL 13, 1998.
MEDITECH PHARMACEUTICALS, INC.
(A Development-Stage Enterprise)
CONSOLIDATED BALANCE SHEET
Feb 28, May 31,
1998 1997
------------ ------------
ASSETS
Current assets:
Cash, including interest-bearing accounts $ -- --
Prepaid assets and other current assets 600 600
------------ ------------
Total current assets 600 600
Due from officer -- --
Equipment and furniture, net -- --
------------ ------------
TOTAL $ 600 $ 600
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses $ 1,020,800 $ 990,600
Accrued professional fees 635,300 635,300
Accrued laboratory expenses 33,900 33,900
Accrued compensation 2,100,300 1,946,000
Advances from parent 2,945,000 2,753,500
Advances from affiliate 0 0
Current portion of long-term debt 0 0
Loan payable 71,000 71,000
------------ ------------
Total current liabilities 6,806,300 6,430,300
Long-term debt
------------ ------------
6,806,300 6,430,300
------------ ------------
Minority interest 191,300 191,300
Commitments and contingencies
Shareholders' equity (deficit):
Preferred stock - $.001 par value, 25,000,000 shares
authorized, none issued or outstanding
Common stock - $.001 par value, 400,000,000 shares
authorized: May 31, 1997, 119,016,925 shares issued and
to be issued; Feb. 28, 1998 119,016,925 shares issued
and to be issued 119,000 119,000
Additional paid-in capital 6,839,000 6,839,000
Deficit accumulated during development stage (13,955,000) (13,579,000)
------------ ------------
Total shareholders' equity (deficit) (6,997,000) (6,621,000)
------------ ------------
TOTAL $ 600 $ 600
============ ============
See accompanying notes to consolidated financial statements.
2
MEDITECH PHARMACEUTICALS, INC.
(A Development-Stage Enterprise)
CONSOLIDATED STATEMENT OF NET LOSS AND
DEFICIT ACCUMULATED DURING DEVELOPMENT STAGE
Period from Period from Period from Period from From
Dec. 1, 1997 Dec. 1, 1996 Jun. 1, 1997 Jun. 1, 1996 May 4, 1982
to to to to (inception) to
Feb. 28, 1998 Feb. 28, 1997 Feb. 28, 1998 Feb. 28, 1996 Feb. 28, 1998
------------- ------------- ------------- ------------- -------------
Research and development expenditures $ -- $ -- $ -- $ -- $ 489,300
------------ ------------ ------------ ------------ ------------
Clinical trials -- -- -- -- 1,347,800
------------ ------------ ------------ ------------ ------------
Expenses for efforts to secure financing,
establish affiliations with clinics
and physicians and formulate a marketing
strategy:
Compensation 60,700 60,700 180,300 180,300 4,801,000
Professional fees 0 0 0 91,400 1,276,600
General and administrative 1,400 1,600 4,200 336,700 3,812,600
------------ ------------ ------------ ------------ ------------
62,100 62,300 184,500 608,400 9,890,200
Organization expenses -- -- -- -- 16,300
Loss on investments -- -- -- -- 120,100
Gain on sale of fixed assets -- -- -- -- (500)
Lawsuit settlement -- -- -- -- 15,000
Write-off of uncollectible note
receivable -- -- -- -- 100,000
Interest expense 65,300 59,700 191,500 175,100 2,440,200
Interest income -- -- -- -- (298,500)
Royalty income -- -- -- -- (75,000)
Miscellaneous Income -- -- -- -- (75,100)
Aborted stock offering costs -- -- -- -- 325,400
Gain on early extinguishment of debt -- -- -- -- (10,400)
Minority interest in net loss of subsidiary -- -- -- -- (329,800)
------------ ------------ ------------ ------------ ------------
Net loss and deficit accumulated during
development stage $ 127,400 $ 122,000 $ 376,000 783,500 $ 13,955,000
============ ============ ============ ============ ============
Net loss and deficit accumulated during
development stage per share of common stock $ .001 $ .001 $ .003 $ .007 $ .16
============ ============ ============ ============ ============
Weighted average number of shares outstanding 119,016,925 119,016,925 119,016,925 116,401,130 88,187,969
============ ============ ============ ============ ============
See accompanying notes to consolidated financial statements.
3
MEDITECH PHARMACEUTICALS, INC.
(A Development-Stage Enterprise)
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
May 4, 1982 (Inception) to Feb. 28, 1998
Additional
paid-in
Common stock capital
------------------------------------------------------------
Shares Amount
------ ------
(000's)
Balance at May 31, 1983 48,000 $ 48,000 $ 295,000
Balance at May 31, 1984 66,115 66,100 4,182,000
Balance at May 31, 1985 66,015 66,000 4,153,400
Balance at May 31, 1986 74,015 $ 74,000 $5,753,600
Balance at May 31, 1987 76,325 $ 76,300 $5,470,700
Balance at May 31, 1988 78,231 $ 78,200 $5,909,800
Balance at May 31, 1989 88,988 89,000 6,129,000
Balance at May 31, 1990 89,088 89,100 6,139,500
Balance at May 31, 1991 92,088 92,100 6,177,800
Change in equity of subsidiary due
to issuance of common stock -- -- --
Common stock granted for services
during Fiscal 1992 -- -- --
Sale of stock, February 1992 2,000 2,000 29,400
Net Loss, year ended May 31, 1992 -- -- --
---------- ---------- ----------
Balance at May 31, 1992 94,088 94,100 6,207,200
Net Loss, year ended May 31, 1993 -- -- --
---------- ---------- ----------
Balance at May 31, 1993 94,088 94,100 6,207,200
Common stock granted for services
during Fiscal 1994 7,105 7,100 195,000
Sale of Stock, April 1994 1,400 1,400 12,300
Net Loss, year ended May 31, 1994 -- -- --
---------- ---------- ----------
Balance at May 31, 1994 102,593 102,600 6,414,500
Sale of Stock, Fiscal 1995 1,088 1,100 12,500
Net Loss, year ended May 31, 1995 -- -- --
---------- ---------- ----------
Balance at May 31, 1995 103,681 103,700 6,427,000
Net Loss, year ended May 31, 1996
---------- ---------- ----------
Balance at May 31, 1996 103,681 103,700 6,427,000
Common stock granted for services
during Fiscal 1997 15,335 15,300 412,000
Common stock subscriptions
Net Loss, year ended May 31, 1997 -- -- --
---------- ---------- ----------
Balance at May 31, 1997 119,016 119,000 6,839,000
Net Loss, period ended Feb. 28, 1998
---------- ---------- ----------
Balance at Feb. 28, 1998 119,016 119,000 6,839,000
========== ========== ==========
4
MEDITECH PHARMACEUTICALS, INC.
(A Development-Stage Enterprise)
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
May 4, 1982 (Inception) to Feb. 28, 1998
(Continued)
Deficit
accumulated
Common during Note
stock development receivable
subscribed stage from officer Total
-------------------------------------------------------------------------
Balance at May 31, 1983 $ 234,400 $ (1,022,600) $ -- $ (445,200)
Balance at May 31, 1984 -- (2,361,000) -- 1,887,100
Balance at May 31, 1985 -- (4,155,100) -- 64,300
Balance at May 31, 1986 $ -- $ (5,688,900) $ (1,440,000) $ (1,301,300)
Balance at May 31, 1987 $ -- $ (7,395,200) $ 0 $ (1,848,200)
Balance at May 31, 1988 $ 0 $ (8,275,400) $ 0 $ (2,287,400)
Balance at May 31, 1989 0 (8,916,800) 0 (2,698,800)
Balance at May 31, 1990 0 (9,438,900) 0 (3,210,300)
Balance at May 31, 1991 0 (9,918,000) 0 (3,648,100)
Change in equity of subsidiary due
to issuance of common stock -- -- -- 0
Common stock granted for services
during Fiscal 1992 -- -- -- 0
Sale of stock, February 1992 -- -- -- 31,400
Net Loss, year ended May 31, 1992 -- (483,100) -- (483,100)
------------ ------------ ------------ ------------
Balance at May 31, 1992 0 (10,401,100) 0 (4,099,800)
Net Loss, year ended May 31, 1993 -- (449,400) -- (449,400)
------------ ------------ ------------ ------------
Balance at May 31, 1993 0 (10,850,500) 0 (4,549,200)
Common stock granted for services
during Fiscal 1994 -- -- -- 202,100
Sale of Stock, April 1994 -- -- -- 13,700
Net Loss, year ended May 31, 1994 -- (753,900) -- (753,900)
------------ ------------ ------------ ------------
Balance at May 31, 1994 0 (11,604,400) 0 (5,087,300)
Sale of Stock, Fiscal 1995 -- -- -- 13,600
Net Loss, year ended May 31, 1995 -- (515,600) -- (515,600)
------------ ------------ ------------ ------------
Balance at May 31, 1995 0 (12,120,000) 0 (5,589,300)
Net Loss, year ended May 31, 1996 (501,600) (501,600)
------------ ------------ ------------ ------------
Balance at May 31, 1996 0 (12,621,600) 0 (6,090,900)
Common stock granted for services
during Fiscal 1997 (5,000) 422,300
Common stock subscriptions 5,000 5,000
Net Loss, year ended May 31, 1997 -- (957,400) -- (957,400)
------------ ------------ ------------ ------------
Balance at May 31, 1997 0 (13,579,000) 0 (6,621,000)
Net Loss, period ended Feb. 28, 1998 (376,000) (376,000)
------------ ------------ ------------ ------------
Balance at Feb. 28, 1998 0 (13,955,000) 0 (6,997,000)
============ ============ ============ ============
See accompanying notes to consolidated financial statements.
5
MEDITECH PHARMACEUTICALS, INC.
(A Development-Stage Enterprise)
CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION
Period from Period from From
Jun. 1, 1997 Jun. 1, 1996 May 4, 1982
to (inception) to
Feb. 28, 1998 Feb. 28, 1997 Feb. 28, 1998
------------- ------------- -------------
Cash provided by:
Financing activities --
Proceeds from long-term debt $ -- $ -- $ 27,300
Advances from (repayments to)
parent and affiliates 191,500 175,100 2,842,000
Issuance of (retirement of)
common stock 119,000
Additional paid-in capital -- -- 5,632,900
Increase in paid-in capital due to increase in equity
of subsidiary due to issuance of common stock -- -- 274,100
Proceeds from sale of warrants -- -- 100
Proceeds from sale of fixed assets -- -- 3,400
Proceeds from minority investment in subsidiary -- -- 300,000
Issuance of common stock for
repayment of debt to parent -- -- (559,900)
------------ ------------ ------------
191,500 175,100 8,638,900
Add (subtract) changes in
components of working capital
other than cash -
Current portion of long-term debt -- -- 0
Note payable -- -- 0
Advances from parent -- -- 717,400
Accounts payable 30,200 26,500 1,020,800
Accrued professional fees 635,300
Accrued laboratory expenses -- -- 33,900
Accrued compensation 154,300 154,200 2,100,300
Stock subscription proceeds refundable -- -- 0
Advances (to) from affiliates -- -- 0
Prepaid and other current assets -- -- (600)
Proceeds from loan payable -- -- 71,000
------------ ------------ ------------
376,000 355,800 13,217,000
------------ ------------ ------------
Net increase (decrease) in cash 0 0 0
Cash at the beginning of the period 0 0 --
------------ ------------ ------------
Cash at the end of the period $ 0 $ 0 $ 0
============ ============ ============
See accompanying notes to consolidated financial statements.
6
MEDITECH PHARMACEUTICALS, INC.
(A Development-Stage Enterprise)
CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION
Period from Period from From
Jun. 1, 1997 Jun. 1, 1996 May 4, 1982
to to (inception) to
Feb. 28, 1998 Feb. 28, 1997 Feb. 28, 1998
------------- ------------- -------------
Cash used for:
Net loss $ (376,600) $ (783,500) $(13,955,000)
Less items not affecting
working capital -
Loss on investments -- -- 120,100
Depreciation and amortization 300 174,100
Common stock options issued
below market price 427,300 726,200
Stock grants -- -- 213,500
Loss on disposal of fixed assets -- -- 37,600
Minority interest in loss of subsidiary (329,800)
Subsidiary stock issued to minority -- -- 284,600
Subsidiary common stock options issued to
minority issued below market price -- -- 202,700
Allocation to parent of additional paid-in capital -- --
from issuance of minority stock options and grants (274,000)
Write-off Deferred stock offering costs -- -- 154,300
------------ ------------ ------------
Cash used for development
stage activities (376,000) (355,800) (12,645,700)
Long-term debt becoming current -- -- (1,500)
Repayment of long-term debt -- -- (25,800)
Purchase of equipment, furniture
and leasehold improvements -- -- (215,100)
Investments -- -- (120,100)
Reclassification of long-term
advances from (repayments to)
parent to short-term advances -- -- (54,500)
Deferred offering costs -- -- (154,300)
Advances from (to) officer -- -- 0
------------ ------------ ------------
(376,000) (355,800) (13,217,000)
------------ ------------ ------------
See accompanying notes to consolidated financial statements.
7
MEDITECH PHARMACEUTICALS, INC.
(A MINORITY OWNED DEVELOPMENT-STAGE ENTERPRISE
OF PETRO-MED INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION:
THE ACCOMPANYING BALANCE SHEET, AS OF FEB 28, 1998, AND THE STATEMENTS OF
DEFICIT ACCUMULATED DURING DEVELOPMENT STAGE, OF SHAREHOLDERS' EQUITY (DEFICIT)
AND OF CHANGES IN FINANCIAL POSITION FOR THE PERIOD FROM MAY 4, 1982 (INCEPTION)
THROUGH FEB. 28, 1998, AND THE RELATED STATEMENT OF SHAREHOLDERS' DEFICIT FOR
THE PERIOD FROM MAY 4, 1982 (INCEPTION) TO FEB. 28, 1998, ARE UNAUDITED, BUT IN
THE OPINION OF MANAGEMENT INCLUDE ALL ADJUSTMENTS NECESSARY FOR THE FAIR
PRESENTATION OF THE FINANCIAL POSITION, RESULTS OF OPERATIONS AND THE DEFICIT
ACCUMULATED FOR THE INTERIM PERIODS PRESENTED. ALL ADJUSTMENTS ARE OF A NORMAL
AND RECURRING NATURE.
PROFESSIONAL FEES INCLUDE LEGAL FEES, ACCOUNTING FEES AND LEGAL PRINTING
FEES. THOSE FEES WHICH ARE NOT SUBJECT TO DISPUTE WILL BE PAID, IN WHOLE OR IN
PART, UPON REFINANCING OF THE COMPANY, IF ANY.
NOTE 2 - INCOME TAXES:
NO PROVISION FOR STATE AND FEDERAL INCOME TAXES IS REQUIRED FOR THE PERIOD
MAY 4, 1982 (INCEPTION) THROUGH FEB. 28, 1998, AS THE COMPANY'S OPERATIONS DID
NOT GENERATE TAXABLE INCOME FOR TAX OR FINANCIAL REPORTING PURPOSES.
NOTE 3 - ADVANCES TO PARENT:
AT FEB. 28, 1998, THE COMPANY WAS INDEBTED TO PETRO-MED INC. IN THE AMOUNT
OF $2,945,000. THESE ADVANCES ARE REPAYABLE WITH INTEREST AT 9% PER ANNUM AS
FOLLOWS: $36,000 ON THE SECOND ANNIVERSARY OF THE COMPLETION OF THE REFINANCING
OF THE COMPANY, IF ANY (SEE NOTE 4), AND THE BALANCE ON DEMAND. PETRO-MED HAS
FILED A CHAPTER XI BANKRUPTCY PETITION, WHICH WAS CONVERTED TO A CHAPTER VII ON
AUGUST 26, 1992.
NOTE 4 - NEED FOR ADDITIONAL FINANCING:
FOR THE PERIOD MAY 4, 1982 (INCEPTION) THROUGH Feb. 28, 1998, THE COMPANY
HAD AN ACCUMULATED DEFICIT OF $13,955,000. THE COMPANY IS CURRENTLY EXPERIENCING
SEVERE CASH FLOW DIFFICULTIES, AND ANTICIPATES SUBSTANTIAL ADDITIONAL CASH
EXPENDITURES WILL BE REQUIRED TO CONTINUE ITS RESEARCH AND DEVELOPMENT
ACTIVITIES.
8
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
DEVELOPMENT-STAGE ACTIVITIES
THE COMPANY IS IN THE DEVELOPMENT STAGE AND ACCORDINGLY HAS HAD NO
SIGNIFICANT REVENUES. ITS PRINCIPAL DEVELOPMENT ACTIVITIES FROM MAY 4, 1982
(INCEPTION) THROUGH FEB. 28, 1998, HAVE BEEN EFFORTS TO SECURE FINANCING, CREATE
A MANAGEMENT AND BUSINESS STRUCTURE, AND DEVELOP AND TEST VIRAPLEX (R) AND
MTCH-24 (TM).
AS OF FEB. 28, 1998, APPROXIMATELY $11,727,300 HAD BEEN EXPENDED BY THE
COMPANY IN CARRYING OUT ACTIVITIES RELATING TO THE DEVELOPMENT AND TESTING OF
VIRAPLEX (R) AND MTCH-24 (TM). THIS TOTAL INCLUDES $1,347,800 FOR CLINICAL
TRIALS, $489,300 FOR RESEARCH AND DEVELOPMENT, $4,801,000 FOR COMPENSATION,
$1,276,600 FOR PROFESSIONAL FEES AND $3,812,600 FOR GENERAL AND ADMINISTRATIVE
EXPENSES, INCLUDING FEES TO CONSULTANTS.
LIQUIDITY AND CAPITAL RESOURCES
INITIALLY THE COMPANY FUNDED ITS ACTIVITIES THROUGH A NOTE PAYABLE TO A
BANK, ADVANCES FROM PRINCIPAL SHAREHOLDERS AND SUBORDINATED DEBT. IN EARLY 1983,
A PRIVATE OFFERING WAS UNDERTAKEN YIELDING NET PROCEEDS OF $531,400. SINCE THAT
TIME THE COMPANY HAS FINANCED ITS DEVELOPMENT ACTIVITIES FROM THE $3,413,000 NET
PROCEEDS OF ITS JULY 11, 1983 PUBLIC OFFERING, LOANS, SALE OF ITS COMMON STOCK,
ROYALTY PAYMENTS AND ADVANCES FROM PETRO-MED INC.
THE COMPANY NEEDS ADDITIONAL FUNDING TO CONTINUE ITS DEVELOPMENT STAGE
ACTIVITIES. MANAGEMENT ESTIMATES THAT THE COMPANY WILL NEED APPROXIMATELY
$2,000,000 IN ORDER TO CONTINUE ITS EVALUATIONS OF VIRAPLEX (R) AND MTCH-24
(TM). WITHOUT THIS ADDITIONAL FUNDING, IT IS UNCERTAIN WHETHER THE COMPANY MAY
CONTINUE AS A GOING CONCERN. MANAGEMENT LACKS SUFFICIENT INFORMATION AT THIS
TIME TO DETERMINE THE EFFECT, IF ANY, OF LEGAL ACTION BY SERGEI GIVOTOVSKY
AGAINST THE COMPANY, PETRO-MED INC. AND GERALD N. KERN. NO ACTION HAS BEEN TAKEN
BY ANY PARTY IN THAT MATTER FOR OVER THREE YEARS.
UPON COMPLETION OF ITS DEVELOPMENT ACTIVITIES AND REFINANCING, IF ANY, THE
COMPANY PLANS TO CONTRACT WITH ONE OR MORE PHARMACEUTICAL COMPANIES TO
MANUFACTURE AND DISTRIBUTE VIRAPLEX (R) AND MTCH-24 (TM). UNDER THIS
ARRANGEMENT, THE COMPANY DOES NOT EXPECT TO INCUR SIGNIFICANT MANUFACTURING OR
DISTRIBUTION COSTS AND, ACCORDINGLY, DOES NOT ANTICIPATE THE NEED FOR ADDITIONAL
FINANCING TO FUND THE MANUFACTURING AND MARKETING OF ITS PRODUCTS.
INFLATION
THE COMPANY HAS NO EXPERIENCE WITH RESPECT TO THE EFFECT OF INFLATION ON
ITS BUSINESS. HOWEVER, THE PHARMACEUTICAL INDUSTRY IS WELL DEVELOPED AND, BASED
ON MANAGEMENT'S UNDERSTANDING OF INDUSTRY EXPERIENCE, IT BELIEVES THAT INFLATION
WILL NOT HAVE A SIGNIFICANT IMPACT ON THE RESULTS OF THE COMPANY'S OPERATIONS IN
THE FUTURE.
9
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS.
NOT APPLICABLE.
ITEM 2 - CHANGE IN SECURITIES.
NOT APPLICABLE.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES.
NOT APPLICABLE.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
NOT APPLICABLE.
ITEM 5 - OTHER INFORMATION.
NOT APPLICABLE.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K.
NOT APPLICABLE.
SIGNATURE(S)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
MEDITECH PHARMACEUTICALS, INC.
(REGISTRANT)
DATED: APRIL 13, 1998 BY: /s/ Cynthia s. Kern
---------------------------------------
CYNTHIA S. KERN, PRESIDENT
AND ACTING CHIEF FINANCIAL OFFICER
10